Machines For Living

Swine Flu: Why Designers Must be Environmentalists

The Swine Flu outbreak provides a teachable moment for everyone, but perhaps most directly for industrial designers, that our world has boundaries, and that the purpose of design is not to try to overcome them through technology. 

The purpose of design is not to overcome the limitations provided by our environment, by nature.  Rather, design should interpret the limits of nature as clues guiding them to the sustainable design of a product or process that makes money in the medium and long terms. 

Case in point: In 1965, there were 53 million US hogs on more than 1 million farms; today, 65 million  US hogs are concentrated in 65,000 facilities, according to The Guardian.  This jump in operational  efficiency was achieved by industrial designers at agribusiness giants like Smithfield (the largest provider of pork in the world) who figured out interesting, but ultimately unsustainable, methods for managing the rampant spreading of disease that occurs when thousands of hogs are shoved together like sardines.  Nicholas Kristof wrote in the New York Times 6 weeks before the Swine Flu outbreak about "the insane overuse" of antibiotics on industrial hog farms, including rampant preventitive use of antibiotics, which results of superbugs such as drug-resistant MRSA.

Telcos & MSOs: Leaving Money on the Table until Telco 2.0

The idea behind Telco 2.0, that telcos collaborate with innovative designers & marketers in other industries to design and sell to those industries new or enhanced communications-enabled products & services, may sound futuristic - certainly not a top priority amidst the current economic crisis and competitive battle for connections.  Surely the examples of such communications-enabled products & services - a washing machine that sends you a free text message when a load is finished, and includes an Order Detergent Refill button that initiates a shipment to your home by your telco that shows up on your next telco bill - aren't the solutions to the current problems of (a) plateaus in demand for broadband and wireless and (b) laid off subscribers cutting their connections.

Or maybe they are.

The following are three examples of new communications-enabled products & services that were designed without telecom involvement and, as a result, without payment to the telcos.  Instead, these providers benefit from consumers' telecom usage without paying a dime themselves.  And the services to these providers that the telcos didn't come up with would have required no capital build-out - just new products riding on the existing network.

Deep Multi-Sided Business Models

William McDonough, co-author of Cradle to Cradle, casts a vision for the next industrial revolution   based on Cradle-to-Cradle design of all products and services as ecosystems.  From a business perspective I believe a deeper understanding of multi-sided business models (central to today's technology industries) is possible when we apply them to an ecosystem-based Cradle-to-Cradle design model.  Whereas multi-sided business models, exemplified by the likes of eBay and Google, are important in markets with multiple sides desiring interaction, players in the next industrial revolution understand that all markets have multiple sides - you just have to look deeper.   Urban renewal expert David Barrie, for example, explains how real estate displays the same multi-sided logic, just on a deeper level. The next industrial revolution will require deep multi-sided business models that address the cooperative networks behind any product or service in order to provide the same products, but in a way that stimulates and captures all network externalities as nutrients: value nutrients, technical nutrients and biological nutrients.  

Players in the next industrial revolution understand that all markets have multiple sides.  The next industrial revolution will require deep multi-sided business models that address the cooperative networks behind any product or service in order to provide the same products, but in a way that stimulates and captures all network externalities as nutrients: value nutrients, technical nutrients and biological nutrients. 

Telco 2.0 and the Redesign of Everything

The residential telecom (and cable) industries appear to be careening down a path of evolution from a provider of consumer network services to a revolutionary platform for all businesses to redesign their products and services.  This path is defined, above all else, by the Broadband Incentive Problem.  The transition to a platform for the redesign of everything, spurred by this problem, is a story best told in three acts: Telco 1.0, Telco 1.0 SP1, and Telco 2.0.

Telco 1.0: Broadband access is currently provided all-you-can-eat in industrialized countries.  The result of this business model has been remarkable broadband penetration, but this penetration leads to a plateau in access revenue while network costs continue to escalate (primarily from video over the Internet).  Korea, which has the highest broadband penetration in the world, is the canary in the coalmine, as the chart to the right shows.  The resulting Broadband Incentive Problem, as explained by the MIT Communications Futures Program (which included participants from Comcast, BT, DT and FT) is the following: "The broadband value chain is headed for a train wreck....Today's prevailing business models give wired and wireless broadband operators the perverse incentive to throttle innovative, high-bandwidth uses of the Internet."  The network cost increases that prompt this throttling are both capital and operational costs, as the MIT report explains in detail.

"The broadband value chain is headed for a train wreck....Today's prevailing business models give wired and wireless broadband operators the perverse incentive to throttle innovative, high-bandwidth uses of the Internet."

Expansion of Service Economy is About More Than Business and Personal Services

Most literature on the expansion of the service economy asserts, correctly, that the primary source of economic activity in the U.S. has shifted from manufactured products to services (a shift as significant as the previous shift from agriculture to manufactured products).  However, analysis of that shift tends to focus on business services (IBM and GE used to be product companies, now most of their revenues comes from business services) and personal services (hospitality, food, your morning mocha latte).

But what about services that are replacing products?  This seems to me to be the next major area of growth in the service economy (and to the authors of Cradle-to-Cradle and Natural Capitalism).  These product-replacing services result in:

(1) Happier customers (see Natural Capitalism quote at bottom of post)

(2) Less pushing (er, advertising) of manufactured products with their long life cycles

(3) Less waste in manufacturing processes (fewer steps that are unrelated to customer benefits, like packaging CDs) resulting in higher profits

(4) Less consumption of energy in manufacturing processes, with the related environmental and national security benefits

What's the Difference Between Advertising and Information Filtering? Personalization

The New York Times reports today that Atlantic Records is the first old school content publisher to receive the majority of its revenues from online sales, and it has bucked industry trends by doing so without a major decline in overall revenues.  How did it Atlantic perform this feat?

“I think we’ve figured it out,” said Julie Greenwald, president of Atlantic Records. “It used to be that you could connect five dots and sell a million records. Now there are 20 dots you can connect to sell a million records.” 

The 5 dots you used to connect are advertising dots.  The 20 dots you now connect are the 20 network-based services that can be enabled based on your content.  The NYT continues, "Replacing compact disc sales are small bits of revenue from many sources: Atlantic Records’ digital sales include ring tones, ringbacks, satellite radio, iTunes sales and subscription services. At the same time, record labels — Atlantic included — are spending less money to market artists."  So Atlantic is making the same amount of money, but investing in network-based content services instead of advertising.